Information Rules: A Strategic Guide to the Network Economy
Information Rules: A Strategic Guide to the Network Economy
Journal of Management Information Systems
A Pricing Mechanism for Digital Content Distribution Over Computer Networks
Journal of Management Information Systems
Journal of Management Information Systems
Journal of Management Information Systems
Selling or Advertising: Strategies for Providing Digital Media Online
Journal of Management Information Systems
Platform-based information goods: The economics of exclusivity
Decision Support Systems
Pricing digital content distribution over heterogeneous channels
Decision Support Systems
Sell by bundle or unit?: Pure bundling versus mixed bundling of information goods
Decision Support Systems
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Media companies are increasingly offering digital content to consumers. Many of these companies are tying digital content with their proprietary digital devices. In this study, we develop a consumer demand model for digital device and digital content based on a constant elasticity demand function. In modeling consumer valuation of the digital device, we take consumer surplus on digital content into account. We further derive equilibrium prices for digital devices based on an oligopoly competition model with horizontal product differentiation. We analyze the equilibrium prices and how prices affect firm profits. We find product differentiation and the level of product substitutability affect prices. We also find that content price plays a significant role in affecting the price of the digital device. Content price can either increase or decrease the tied digital device price depending on the profit margin and demand elasticity of the digital content. We further analyze how content and device prices affect their respective profits and the overall profit of the firm. We extend our model to vertical product differentiation and find vertical product differentiation and the level of product quality affect prices.